Why Bengaluru Is The Silicon Valley For AI Startups In India

Image source: medium.com/cityai/bangalore

As a destination for development and innovation, Bengaluru has welcomed technology and talents with open arms. Today, the city houses India headquarters of all the major tech giants and has turned itself into a tech powerhouse. Nicknamed the Silicon Valley of India, Bengaluru has become a favourite destination for startups to thrive and make a mark.

According to a study by NASSCOM and Zinnov, India is ranked the 3rd biggest startup hub in the world, with Bengaluru housing a substantial number of these startups. The city currently houses 7,200 – 7,700 registered startups and a total of 1,200 tech startups were added just in 2018.  

The study further highlighted that advanced technology startups grew by almost 50 per cent from 2017 and  AI, data analytics and IoT startups have witnessed the highest adoption rate. Another positive trend associated with the booming startup bubble has been the overall job creation across the country. As per the study, an estimated 40,000 direct jobs were created in 2018 alone.

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Speaking about the city’s reputation for being one of the finest destinations for startup investment, the state CM, before the launch of Bengaluru Tech Summit said, “Bengaluru has emerged as one of the global innovation hubs in the league of Tokyo in Japan, Silicon Valley in the US and Tel Aviv in Israel. The summit will provide a platform for knowledge sharing on emerging technologies like Artificial Intelligence, Robotics and Blockchain.”

Key growth indicators of AI startups in Bengaluru

  • According to a 2019 study, by AIM which tracked the funding of AI and analytics startup in India,  the highest increase in year-on-year analytics revenues for an Indian city came from Bengaluru, from $539 million in 2017 to $ 739 million this year; it witnessed an increase of 37%. The study also points out that there is a lot of optimism towards AI- driven solutions like automation frameworks for data integration, dashboards for visualisation and energy and automation specific applications being the most funded.
  • Bengaluru eclipsed other Indian cities by a staggering margin, grossing $133 in aggregate funding. India’s Silicon Valley was followed by Chennai at $35 million and Gurugram at $29.5 million.
  • Big ticket funding was led by US-Bangalore startups that included RPA player Automation Anywhere ($raised 300 million from Softbank Vision Fund) and  enterprise AI specialist Noodle.ai (raised $35 million from Dell Technologies Capital and TPG Growth).


Key growth indices

Members of Automation Anywhere

Multiple factors have played a key role in driving the growth of artificial intelligence and analytics market in India, especially in Bengaluru. We look at some of the key drivers which resulted in the growth of AI and analytics startups in the city.

1) Increased Investor Interest:  As per the AIM study, startups raised an all-time high capital, registering a 368% growth from 2017. In 2018, startups with operations in India and globally raised approximately USD$ 529.52 million in funding rounds.  

Added to this is a growing trend among successful startup entrepreneurs to invest in other startups as well as the entering of non-tech participants in the market through acquisitions. In April 2018, Mukesh Ambani owned Reliance invested $180 million into Embibe, the Bengaluru-based AI education platform. The Softbank led financing of Automation Anywhere is one of the biggest deal breakers in present times.

2) The strong presence of startup hubs and incubators: Realising the potential of startups in job creation and bring out new development thus affecting the economy at large, corporates, educational institutions and even government has played a vital role mentoring and grooming young startups. Even traditional non-players such as Target and YES Bank have stepped into the analytics startup market to prepare startups through their accelerator programmes.

3) Presence of educational institutions: Educational institutions such as IITs and IIMs have also played a vital role in identifying young entrepreneurs and nurturing their startup dreams. Through world-class R&D infrastructure, impressive alumni network and through monetary support in the form of seed and early-stage funding, key educational institutes in India are contributing extensively to the startup boom.

4) Aspirations of becoming a global company: With the global market for AI and ML looking very promising, AI startups are looking market and product expansion into new markets. In 2018, California and India based Automation Anywhere bagged the biggest cheque of $300 million from SoftBank Vision Fund. As compared to 2017, where the startups received an aggregate investment of $113 million, funding rose to a record 368% in 2018.  

Akshaya Asokan
Akshaya Asokan works as a Technology Journalist at Analytics India Magazine. She has previously worked with IDG Media and The New Indian Express. When not writing, she can be seen either reading or staring at a flower.

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